4:06 am

Thu November 1, 2012

The Complicated Economic Impact Of Sandy

Sandy is likely to go down as one of the costliest storms in U.S. history. The initial estimates of the losses are anywhere from $20 billion to $50 billion. But as NPR's Jim Zarroli reports, the impact on the economy is more complicated than it may appear. Some companies will even make money.

JIM ZARROLI, BYLINE: Economist Greg Daco has been tallying the potential costs of Hurricane Sandy and he says there's no question it's going to hurt the economy more than it will help it.

GREG DACO: I think overall, large hurricanes and large storm systems tend to have a net drag on the economy.

ZARROLI: The storm hit a huge swath of the country. Daco, of IHS Global Insight, says it will cost $10 billion to $20 billion in damages to infrastructure, such as houses, commercial buildings, highways and transit systems. And it will cost a similar amount in lost business at companies that have been forced to shut down in the storm's wake.

ZARROLI: Unlike Hurricane Irene, which happened over a weekend, Sandy took place on Monday and Tuesday, so a lot more work time was lost. Daco says some of that lost business can be made up later. Airlines, for instance, will lose a lot of money because of canceled flights. But they may add some later to make up for it. Likewise, a manufacturing plant might add extra shifts once things are back to normal. But Daco says some business is lost forever.

DACO: A good example of a permanent loss in terms of business is a restaurant that was closed during the storm. It will not really be able to make up for the loss in terms of sales.

ZARROLI: And that will have a big impact on many businesses and on their employees, who will lose wages during the shutdown. And small businesses are especially vulnerable. They often lack the financing and inventories of bigger companies and so they're more vulnerable to sudden disasters. Iqbal Singh runs a small grocery store in a blacked-out neighborhood of Manhattan. He stayed open this week, even after losing power because his operating costs are so high.

IQBAL SINGH: Once we lose the day, never make up. The rent is too high here. So we have to open. We're working for the landlord.

ZARROLI: So a lot of businesses will lose money, but a lot of others will fare better. A big storm can shave points off the country's growth rate, but some of it is made up later on. That's because there are always companies that profit from the rebuilding that takes place after a big storm like Sandy. Construction firms, clean-up companies, even tow truck drivers.

Jack Kleinhenz is chief economist at the National Retail Federation. He says certain kinds of retailers will profit in the months to come.

JACK KLEINHENZ: Those retailers that are providing materials, furnishings for replacement purposes are going to probably benefit.

ZARROLI: But Kleinhenz notes that the more people spend on rebuilding their homes, the less they will have to spend on other things.

KLEINHENZ: Firms that are in the discretionary world, you know, sellers of clothing, possibly jewelry, probably might be seeing a detriment to their revenues.

ZARROLI: And that's a special problem for retailers right now, because the holidays are approaching. It's the time of year when consumers typically spend a lot of money on discretionary purchases. And to the extent that Sandy cuts into consumers' purchasing power, they're going to shop less. And that's likely to affect the bottom line at a lot of companies.

Jim Zarroli, NPR News, New York.

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